The IMF lowered its forecast for global growth Tuesday a day after the World Bank cut its growth forecast for East Asia and Pacific region. The IMF downgraded its growth forecast for the world to 3.3 percent this year and 3.6 percent for 2013 citing the debt crisis affecting the euro zone and the faltering U.S. economy.

“The IMF’s forecast rested on two crucial policy assumptions that policymakers in Europe would take necessary actions to get the single currency area crisis under control and those policymakers in the U.S. take action of tackle the 'fiscal cliff' and do not allow automatic tax increases and spending cuts to take effect. Failure to act on either issue would make growth prospects far worse,” according to the World Economic Outlook released by the IMF Tuesday.

"Asian equities markets are feeling the positive effects from the recent global easing, prompting investors to buy the region's stocks which have remained undervalued. Weak third-quarter corporate earnings, as well as a slowdown in Chinese growth rate to below or around 8 percent have already been noted in various reports. But the outlook for sluggish fundamentals will likely limit the markets' upside,” Hirokazu Yuihama, a senior strategist at Daiwa Securities, told Reuters.

Chinese shares rallied on hopes that the government would soon announce monetary easing measures to rejuvenate the economic growth momentum in the world’s second largest economy after major international financial institutions slashed their growth forecasts.

The IMF cut its growth forecasts for China to 7.8 percent for this year and 8.2 percent for next year, saying stimulus efforts have so far failed to deliver the expected boost. The World Bank Monday warned that the slowdown in China could get worse and last longer than what is expected now due to the uncertain global economic outlook.

Financial shares rallied on news that the China’s central bank conducted a large cash injection into the money markets to ease the tight liquidity conditions. According to Reuters, the central bank conducted the second largest gross injection on record by pumping 265 billion yuan ($42.15 billion) into the country's money markets via reverse the bond repurchase agreements Tuesday morning.

Japanese shares ended lower, led by declines from exporters on a stronger yen, even as a report showed Japan’s current account surplus for August was wider than estimated. Seasonally adjusted current account surplus widened to 722.3 billion yen from 335.4 billion yen in July.